CrowdLords offers compared to some other popular alternative finance platforms
With Alternative Finance platforms growing in popularity, it's wise to know the similarities and the differences between what's on offer from different P2P Property lending and Property Crowdfunding companies.
Knowing the basic differences between P2P Property lending and Property Crowdfunding is fundamental in order to gauge which mode of investing suits your financial circumstances and appetite for risk.
|Characteristic||P2P Property Lending||Property Crowdfunding|
|Nature:||Loan||Loan / Shares|
|Types:||Peer-to-Peer Loans||Equity or debt-based investments|
|Risks:||Low / Medium||Equity or debt-based investments|
|Potential Benefits for Investors:||Fixed interest payments||Fixed interest payments / Dividends / Security|
|Platforms:||Assetz Capital / FundingSecure||House Crowd / CrowdLords|
Note: This table is provided for illustrative purposes only.
Firstly, debt-based investing via P2P Property platforms and Property Crowdfunding is considered to be a slightly lower risk than equity-based crowdfunded investing. This is because when you invest via debt-based investments, you are simply loaning the money to the borrower with the understanding that you will receive a certain rate of interest when the borrower pays back the money at the end of the term. It should still be noted that investor returns are still dependent on the success of the underlying project, and cannot be guaranteed.
However, when you buy equity by investing in shares (which is something that only Property Crowdfunding platforms offer), it can feel like you are personally more committed. Investors become shareholders in the SPV which owns the property and their returns depend on the profits generated by the development project, in proportion to how much they invest. As such, the risk can be higher than with debt investments, but the rewards can be greater.
The P2P Property Lending and Property Crowdfunding platforms that have a reputation for transparency whilst also offering good returns tend to prove the most popular. However, how do they compare in other aspects?
Let's look at three successful platforms offering a range of similar and different loan opportunities, taking into consideration how they all operate, the general level of risk involved, and the statistics behind how many loans successfully complete.
|Assetz Capital||House Crowd||CrowdLords|
|Equity Investments Available?||No||Yes||Yes|
|Debt Investments Available?||Yes||Yes||Yes|
|IFISA Investments Available?||Yes||Yes||Yes|
|Loan Terms Offered:||6 months – 5 years||6 months - 20 months||6 months -30 months|
|Return Range:||4% - 11.5% p.a.*||Up to 10% p.a.||12% - 25%+ p.a.|
Notes:*Assetz Capital offer the following separate account returns;
Quick Access Account - 4.1%.
30 Day Access Account - 5.1% (variable but minimum 4%)
90 Day Access Account – 5.75%.
Property Secured Account – 5.5%
Manual Lending Account – 11.5%.
>Data presented is accurate as of 15th November 2019.
You can see that Assetz Capital do not offer equity investments and they specialise in P2P property lending. As explained before, debt-based investments are generally considered lower risk than the equity investments offered by House Crowd and CrowdLords. However, as we can see on the table, both these platforms also offer debt-based loan opportunities too.
As a direct result of offering loans rather than shares however, the returns offered by Assetz Capital tend to be significantly lower than with equity investments, only increasing to a higher return when investing via the Manual-Lending Account. It's worth noting that these types of loans are not secured by the company's Investor Provision Fund.
|Assetz Capital||House Crowd||CrowdLords|
|Security Offered:||Property taken as asset + Emergency Investor Provision Fund||1st charge on debt investments / equity investments with no charge||1st and 2nd charge on debt investments / share ownership with equity investments|
|Non-recoverable Bad Debt:||0%||11 (6.8%) + 25 (15.5%)||0%|
Note: *Each loan opportunity has a specific minimum investment amount.
Data presented is accurate as of 15th November 2019 and all risk levels are based on CrowdLords' assessment.
The House Crowd offers both debt investment and equity investment opportunities, with their debt loans secured via a 1st charge. CrowdLords' debt investments are secured via either a 1st charge or a 2nd charge, giving investors the option of building a balanced portfolio. Although the 2nd charge debt investments at CrowdLords represent a higher level of risk, the interest returns offered tend to be much higher, and some equity returns are even over 25%, double those of Assetz Capital and House Crowd.
Investors should be aware that where security is in place or assets held in support of the investment, there is a risk that if the underlying borrower defaults, or if there is a delay in realising the asset, then the asset may not be sold for enough to cover the loan or may result in a delayed repayment of investors' money. Additionally, where the security is not a first charge, in the event of a sale of the asset, funds will be available to be paid to investors only after payment to the charge holders who rank ahead of investors have been paid.
Most of the loans on the Assetz Capital platform are protected by the Investor Provision Fund, which offers a double-layered security after taking the property as an asset. Should the project not complete and the property cannot be sold to reimburse investors, Assetz Capital try to pay back all capital invested using a reserve fund.
It should be noted that investors' loans and investments are not covered by the FSCS on any platform, so investors will find Assetz Capital's initiative of attempting to cover investor losses with a separate fund very attractive. This is coupled with the fact that the non-recoverable bad-debt percentage to date stands at 0%.
Similarly, what is noticeable about CrowdLords, despite offering 2nd charge debt-based investments and equity investments as well as 1st charge debt-based investments, is that up to now, no loans have defaulted. This encouraging characteristic of both Assetz Capital and CrowdLords could be linked to the fact that both platforms' due diligence procedures involve face to face meetings with the borrower as well as an in-house analyst carrying out a stringent series of checks and balances.
At The House Crowd, the number of defaulted loans currently stand at 11 (6.8%) + 25 (15.5%)* according to https://www.thehousecrowd.com/p2p-info-and-stats.
*Number and percentage of loans not redeemed within / beyond tolerance and data presented is accurate as of 15th November 2019.
The minimum investment varies greatly between the three platforms. Although you can technically invest one penny at Assetz Capital, the other platforms have much higher minimum investment levels. In the case of CrowdLords, this is designed to make potential investors stop and think before they invest.
Since its inception, Property Crowdfunding has started to democratise property investing, opening the doors to a wider pool of investors, away from the high entry levels of 20 years ago.
Bearing this in mind, some investors may be put off by The House Crowd's minimum investment level, particularly young people, as they may not have £1,000 of disposable income to invest into property development projects.
Assetz Capital's minimum investment amount certainly makes the platform accessible to much more people, but with fairly conservative returns offered in comparison with similar platforms, investors will not see worthwhile gains on low amounts of capital invested.
With minimum investment amounts from £250, CrowdLords mixes accessibility for people with less disposable income to invest, with amounts high enough to see worthwhile expected returns.
|Assetz Capital||House Crowd||CrowdLords|
|Due Diligence:||Face to face meetings with borrowers / In-house loan analyst||Credit checks on borrower / Full valuation on property||In-house Investment Analyst / Face to face meetings with borrowers / Project valuation|
|Ability to diversify:||Auto-allocation (apart from Manual Lending Account)||Customer responsibility but possible to register for Auto-Invest||Customer Responsibility|
|Investments issued to date:||Information not available||219||55|
Note: Data presented is accurate as of 15th November 2019.
The auto-allocation function that both Assetz Capital and The House Crowd offer is not available with CrowdLords. The service takes away the work of analysing loans to decide which project you wish to invest in. Once you have paid funds to the platform, the money is then automatically allocated across a number of available loan options in order to diversify your portfolio. Platforms believe that this offers a decent level of risk mitigation.
Although auto-allocation removes your control of investing in specific projects that are of particular interest, you may enjoy the hands-off approach of having your portfolios diversified which can offer security by not putting all your eggs in one basket, as well as saving you time. This is especially true for IFISA funds which you should keep invested rather than sitting in your eWallet.
However, removing the control to invest also has its potential drawbacks. There may be certain projects that you specifically don't want to fund due to not being comfortable with the property details or the loan conditions. With auto-allocation, your capital is partly allocated into all loans available on the platform, including loans you may find unattractive.
At CrowdLords, you, as the investor, have all the control to allocate your funds to whichever project you want. Considering that the projects available to fund at CrowdLords range from 1st and 2nd charge debt investments to equity investments, there is a broad scope to attract a wide spectrum of investor interests. By providing this range, you can diversify your investment portfolio, thus further attempting to mitigate the risks involved in Property Crowdfunding.
Choosing a platform that you feel comfortable with is essential. It's your hard-earned money, and you want the Property Crowdfunding platforms to offer you the best options to make your investments work hardest for you.
Different platforms will offer a mixture of slightly different investment characteristics, and you should consider which ones appeal to you in order to gauge which platform works for you.
Often, investors who consider themselves less experienced in the Property
Crowdfunding sector with less disposable income, are more attracted to platforms where minimum investment amounts are low.
Conversely, more experienced investors with a greater appetite for risk may find the other platforms more attractive, where some of the investments available are equity-based and as a result, the returns are subsequently expected to be much greater.
As time passes and the sector continues to evolve, it is ever more likely that there will be something for everyone. After taking your own personal and financial requirements into consideration, you should make your choices based on what is right for you.
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